Friday, 19 December 2008

It's Christmas Time

.. and I am off on holidays for a couple of weeks. Back to all things spatial in the New Year.

I hope you enjoy your festive season.

Friday, 12 December 2008

Congestion charging

Manchester voters have overwhelmingly rejected proposals for a congestion charge.

There have been some suggestions that the problem was the particular scheme that Manchester was proposing. I haven't been following the details, but I have a sneaky suspicion that this may not be the root cause of the problem. Just take a look at the furious public response to Eddington's suggestion for national road pricing (nearly 2 million people signed an online petition against the idea).

Most experts agree that charging is the best way to deal with the problem of traffic congestion. When people decide how to make a journey they weigh up their personal costs and benefits of different ways of travelling. Unfortunately, choosing to travel by car also imposes costs on other people, but we ignore these costs when making our decision. The end result is too many car journeys. If only we could find a way to get each of us to take in to account the cost that we impose on others when we decide to drive by car. Congestion charging does this, while still leaving people free to choose how they travel.

Lined up against this are terribly emotive arguments around our right to travel, the effect on the poor and the impact on specific businesses. These are all far easier to sell than the economists argument about large overall benefits outweighing any of these specific costs. Somehow, we need to convince the public that the latter really is the case. Sadly, the result in Manchester suggests we still have a huge way to go.

Wednesday, 3 December 2008

Changing UK

The BBC are focusing on geographical segregation. Lots of pretty maps show how areas of the UK differ in terms of health, wealth, ethnic composition, political engagement etc. You can even see how the geography of "loneliness" is changing. On a wide number of indicators areas of the UK are becoming increasingly different. The tone of the coverage suggests that this is all bad news. Is it?

According to the maps, areas in the south seem to generate higher incomes than areas in the north. Surely that's bad? But it turns out that the south has also seen the largest population growth. So population is growing fastest in areas that offer the best economic opportunities. In terms of individuals, doesn't that sound like a rather good thing?

Let's take another example. It would take 4,289,377 people moving home to make the geographical distribution of age even across the country. But are unequal age distributions a bad thing? There are clearly rather large benefits to having families with children spatially concentrated in one area, while young workers live elsewhere (the former want good schools, the latter good night clubs and spatially separating schools and night clubs is generally good not bad).

What about "loneliness"? You are loneliest if you are non-married, live in a 1 person household, have moved within the last year and are renting privately. Let's set aside the issue of what you are actually capturing here and imagine that you fit that category. Are you better or worse off living close to people who also fit in that category? There seem to be good arguments why spatial concentration might on balance be a good thing (imagine for example that you were hoping to change your non-married status - isn't that easier to do when surrounded by other non-married people).

These maps are a nice description of what is happening in different areas. But they are not an analysis of the benefits and costs of the resulting segregation. Because people are different, places will tend to be different. Whether this is good or bad depends on whether the composition of a place actually has any direct impact on the well being of individuals who live in that place. These maps can't answer this question, so they tell us something about who is living where, but not whether this matters.

Friday, 28 November 2008

Response to the Sub-National Review

The government published its response to the public consultation on the SNR earlier this week.

Despite the current economic situation, government still needs to make progress on fundamental questions about the future of urban and regional policy. Indeed, for local policy makers, because there is little they can do that will affect the impact of the economic downturn, it is doubly important not to lose sight of medium to long term issues.

So, then, to the SNR. There is more detail on how the local authority economic assessment duty will be implemented and the form that sub-regional collaborative agreements might take. There's also confirmation of the move to integrated regional strategies. As I have discussed elsewhere, these strategies will need to make a decision on the extent to which efforts to deliver regional growth rely on the spatial concentration of resources as opposed to "jam spreading". Sign off by a "local authority leaders' forum" (the original plan) would tend to favour the latter. In the new proposals, a "local authority leaders' board" will have joint responsibility with the RDAs (with disputes resolved by ministers). This will, in principle, allow more concentration and less jam spreading.

From the view point of achieving regional economic growth, current evidence suggests this may make sense. The problem, of course, is that this reduces democratic legitimacy. In the absence of elected regional bodies, squaring that particular circle will require careful thought about how to provide local authorities with incentives to sign up to integrated strategies that concentrate resources. I have talked about this in the past with relation to housing targets. Successfully agreeing (rather than imposing) integrated regional strategies will require far more work to tackle this difficult issue.

Tuesday, 18 November 2008

SERC launch

Over the last few days, we've held a series of events in London, Swansea and Newcastle to mark the launch of the Spatial Economics Research Centre.

Professor Ed Glaeser, from Harvard University, gave the inaugural SERC lecture on Our Urban Future. If you missed Ed's fascinating talk you can hear what he had to say by listening to the podcast.

If you want to make sure that you don't miss our events in future, then please sign up to our mailing list.

I'm now off to New York for the 55th Annual North American Meetings of the Regional Science Association International. I'll try to post next week on the most recent research findings from this gathering of some of the world's leading urban and spatial economists.

Tuesday, 4 November 2008

Greener Homes?

The Environmental Audit Committee has undertaken an environmental analysis of the government's house building plans. They published their report yesterday.

Let me comment on a few of their recommendations. First, they question whether the 3 million housing target is justified given current economic conditions. Note two things (i) this is a target for 2020 - unless the recession is very deep and long you wouldn't expect much to change on that time horizon (ii) recent figures suggest that we are some way from meeting this target.

The credit crunch does raise a question about the timing of house building. The report argues that more should occur after stricter carbon targets are introduced in 2016. This may be sensible, but in the absence of government policy to the contrary (a large social house building programme for example?) it will happen anyhow as the housing market turns down.

Finally, there's the issue of the size of new houses and gardens and where we should build them. I'll deal with the issue of green versus brown field another day when I have taken a closer look at the numbers (my back of the envelope calculation translates CPRE's 36,000 football pitches between now and 2020 in to about 1.5% of green belt land in England; and far under 1% of all undeveloped land). For now, just consider the Committee's suggestion that government should stop trying to address people's aspirational demand for bigger houses and gardens because these don't reflect urgent need. That kind of logic works in a centrally planned economy where government allocates housing to people. However, last time I checked, we still allowed people to buy and sell houses freely (even if they are not choosing to do so). If we don't increase the supply of space as the demand for space rises, then the price of space and thus of housing will rise again once the economy recovers. Cue complaints about housing affordability long after the current problems have been forgotten ...

Friday, 24 October 2008

The geography of recession

Conventional wisdom suggests that recessions tend to spread misery around. If this is true, we might expect the "north-south divide" to narrow over the coming months, particularly if sectors over represented in the south (financial services for example) are especially hard hit.

Is the fact that it's about to get "grim down south" likely to lead to a fundamental shift in the economic geography of the UK (as appears to be suggested by some commentators)? I'd make two points. First, this kind of discussion confuses changes with levels. A couple of quarters of negative growth will certainly be highly unpleasant for large numbers of people. A higher proportion of those directly affected may indeed live in the south. But these kind of changes still wont be enough to eliminate the gap in income levels. You would then need the working of the economy to reinforce these initial changes. But theories of economic geography tell us that it can take very large shocks to fundamentally alter existing geographical differences.

That brings me to my second point. Although there is some academic debate on this, the south was probably unusually hard hit in the early 1990s recession as well. A different shock, may be, but it reminds us that we have been here before and that the south is very capable of bouncing back from recession.

Overall, a fundamental long run shift in the economic geography of the UK is not impossible in response to the credit crunch but it does appear to be unlikely.

Monday, 13 October 2008

Paul Krugman - Nobel Laureate

Paul Krugman has been awarded the 2008 Nobel Prize in Economics "for his analysis of trade patterns and location of economic activity".

Krugman is actually a pretty controversial character in the (small) world of academic economic geography. When he came up with the theory that lead to the "New Economic Geography", he managed effectively to ignore several decades worth of work in geography and to focus on mechanisms that were considered "old hat". Traditional geographers did not like this one bit.

But to many economists, this one included, Krugman's work was a revelation. Relative to much of the existing literature, Krugman started with individual firms and workers (not "regions") as actors. Economic interactions between firms and their consumers (demand linkages) were put at the core of understanding divergent outcomes. As transaction costs fell, relocation of these firms and works could change regional economic environments leading to different development for initially similar regions. Outcomes could be "path dependent" so that history matters and similar changes need not always lead to the same outcomes. And these outcomes could be sub-optimal in terms of terms of both efficiency and outcomes.

Krugman's work gives us all this in elegant mathematical models that increase our fundamental understanding of the forces that shape economic geography. His theories continue to inspire a generation of economists who are interested in understanding these forces. Together with developments in urban economics, Krugman's New Economic Geography revitalized research in to the nature, extent, causes and consequences of spatial disparities.

There is no doubt he will be controversial choice. He has been a vocal critic of Bush. Non-economists don't like him. Even some "purist" economists might have a problem with the decision. But for those of us interested in the application of rigorous economics to real world problems the award is a very welcome one.

Friday, 26 September 2008

Does restricting big-boxes help independent retailers?

It seems obvious that restricting out-of-town big boxes should help central city retailers. So planning guidance that restricts their entry not only protects the green belt but also helps revitalise town centres. And it should also help independent retailers to boot. Right?

As is so often the case, unfortunately, life is not that simple. A fascinating new paper by Raffaella Sadun suggests that in England, restricting out-of-town big boxes can actually hurt independent retailers. Why? Because big chains appear to have substituted out-of-town boxes for smaller stores in city centres that more directly compete with those independent retailers.

Of course, this can't tell us about the overall effects on town centre vitality or on the environment. But it does remind us that the law of unintended consequences means that there is a crucial role for careful research in evaluating these effects. SERC researchers are intending to look at some of these issues in the near future. It will be interesting to see what we find.

Friday, 19 September 2008

House building (again)

A few weeks back, I wrote about the fact that the most recent housebuilding figures didn't bode well for long term affordability. David Orr, the chief executive of the National Housing Federation is set to talk about this today - he suggests that the government target of three million new homes in England by 2020 is "almost impossible" to meet. To help, they want more spending by government and faster planning decisions.

Its difficult to see how either of either of these measures can make a significant difference. £400m pounds from CLG will help pay for 5,500 homes over the next 18 months. Mr Orr is predicting a shortfall of 1.4m homes ...

Faster planning will help to some extent, but not if planners still end up saying no to housing. As I've discussed elsewhere, addressing such anti-house building sentiment will require more imaginative ways to ensure that communities are actually willing to accept new housing.

[PS: The post that I just referred to was concerned with rural housing. One of the issues that always crops up there is the "problem" of second homes. So, I was interested to see that CLG's latest report on Housing in England (published yesterday) had some figures on this. In the last decade, the number of second homes increased by roughly 40,000 to 241,000. While this might cause a problem for a small number of selected rural communities, its hard to see this as a major issue for housing affordability in the UK as a whole.]

Wednesday, 17 September 2008

Early intervention

I have just returned from paternity leave, so should declare a personal interest in the issue of early years intervention - the subject of a joint Smith Institute / Centre for Social Justice report published yesterday.

While there are clearly many strong arguments to be made for early years intervention, there is however one conclusion, highlighted by the press release, that I find difficult to square with research literature. This is the idea that "a child stands a better chance in life if he or she comes from a bad family in a good neighbourhood than a good family in a bad neighbourhood".

As Paul Cheshire, Steve Gibbons and Ian Gordon discuss in a recent SERC policy paper "there is little evidence of material effects from local social mix on [life chances] at least for the disadvantaged groups which are the major focus of this concern". If such effects are detected their influence is usually swamped by those of individual and family characteristics so it seems highly unlikely that the influence of a 'bad' neighbourhood could outweigh that of a 'good' family.

This matters because it means that the policy response needs to be targeted to help particular families rather than particular neighbourhoods. And one would imagine that how to go about the former is a much more politically contentious issue than tackling the latter.

Friday, 29 August 2008

Building Bridges

What role might a new Thames Gateway Bridge play in the regeneration of that area? GLA Economics' latest research to answer this question looks back to the building of bridges across the Thames in the medieval period. The report makes for an interesting read and reminds us that the impacts of infrastructure projects are complex and long term. But I'm not sure that it brings us much closer to providing an answer to the specific policy question. [An observation that could be made about much academic work - so no particular criticism implied.]

Generally speaking, the economics literature is pretty sceptical about the role of infrastructure in boosting local economic activity in struggling areas. After all, as population in these places is historically declining, they likely have plenty of infrastructure relative to people. How is adding more going to help? (You can make a similar argument about net increases in the supply of housing).

Thames Gateway might be a little different given that growth in employment and population are projected if regeneration is successful. But even if this happens, standard cost benefit analysis (which would look at the gains in travel time) almost certainly wouldn't justify building. So supporters of the bridge need to point to the wider economic (regeneration) benefits that might materialise.

The problem is, that we have very little idea how important these are in practice. DfT is about to propose some guidance on how these might be incorporated in appraisal but these will be based on best estimates of what the gains might be. What is needed is some evaluation of projects to see what actually happened. SERC is hoping to undertake some of these shortly, although I think we'll be looking at projects from the 1990's not the 1290's.

Thursday, 21 August 2008

House building and affordability

I was never much good at "up-and-down" economics and couldn't tell you what today's house building statistics mean for next quarter's house prices.

But the fact that completions in the year to June 2008 were 4% lower than in the previous year doesn't bode well for long term affordability.

Also, its interesting to see that, in keeping with historical trends house building in England is only marginally biased towards the south (my back of the envelope calculation had 44% of housing completions in London, the South East and East regions as opposed to about 42% of the stock). That certainly puts all the fuss over policy exchange's "move to the south" suggestions in to perspective.

Thursday, 14 August 2008

Are Policy Exchange Insane?

Policy exchange have caused controversy with their report on urban regeneration. [I should declare an interest - one of the reports co-authors, Tim Leunig, is a SERC affiliate]

The report actually contains a lot of thought provoking material. So, why the extreme reaction? Because, to stylize grossly, it suggests that some places have lost their reason d'etre, that economic regeneration isn't working and that we should build houses so that people can move to places with more economic opportunities. A stylized reaction then goes: I am from [insert name of place]. It's a lovely place to live because [insert something nice about the place / the cost of living is low]. Also, if you want to see the future just look at the development of [insert name of nice new buildings].

These reactions are important because they remind us that people and places are different and that amenities and cost of living matter as well as economic opportunities. Many policy discussions and proposals forget this, but it will be central to SERC's research on spatial disparities.

What is lost in the storm that has been created, however, is a focus on the much more serious question: what should society do if the economy works in such a way that jobs are created in places different from where people live? The traditional response is to bring jobs to the people. This has been government policy for a long (i.e. decades) time. Policy exchange claim that this isn't working and suggest that instead we should help people move to jobs. Getting the answer to this question right matters a lot more than whether I think my town is better than yours.

Tuesday, 12 August 2008

The case for abolishing Regional Development Authorities?

The TaxPayers Alliance thinks that Regional Development Agencies should be abolished.

RDA's were established in 1999 to help raise the growth rates of all regions and to narrow the gap in growth rates between the richest and poorest regions (so that the richest regions didn't keep pulling further ahead). The Tax Payers Alliance argue that regions did better between 1995 and 1999 than they have done since and that RDA's should thus be abolished. If only things were that simple.

To consider whether RDA's should be abolished we need to know what would have happened if they didn't exist. If we assume that regions would have carried on growing post-1999 as they had between 1995 and 1999 then RDA's have been bad for growth. But whose to say this would have happened? Perhaps regions would have grown much slower if it weren't for the efforts of RDA's. After all, the UK's recent economic growth performance is generally considered as comparing pretty favourably to other similar nations. In this scenario, RDA's have been quite good for growth.

What about the gap between the growth rates of rich and poor regions? Again, it depends what we think would have happened without RDA's. Perhaps London and the South East would have pulled even further ahead?

A deeper question relates to whether these two goals, greater growth everywhere and narrowing the gap in growth rates between rich and poor, are mutually compatible (SERC's first policy paper has more on this). For example, the TPA's alternative policy recommendation is a cut in the small business rate of corporation tax. I see that this might do something for growth everywhere, but how, exactly, would this help with the gap in growth rates between the regions?

Personally, I am agnostic on RDA's. There is a serious debate to be had about policy objectives. There is a need for more evaluation of their net impacts (what things have RDA's made happen that wouldn't have happened otherwise) and a comparison to the opportunity costs. There is also much more evidence needed on which policies, if any, need regional coordination. If only answering all these questions was as simple as a before and after comparison of regional growth rates ...

Monday, 4 August 2008

Rural Housing

What, if anything, should be done about the fact that rural housing is increasingly expensive relative to rural earnings?

The Taylor Review suggests a shake up of planning and affordable housing policy as the solution. Central to this is the need to deliver new rural housing by overcoming local objections. In market towns, this would be achieved through “master plans” which would stop the growth of bland housing estates and, instead, deliver popular “neighbourhood extensions”. In smaller rural areas, community led affordable housing initiatives would do this, by delivering local homes for local people.

I have three observations on all of this.

First, developers get a lot of stick for the kind of housing that gets built in the UK. But, blandness aside, it’s unclear that they shoulder all the responsibility for the lack of commercial development on the outskirts of our towns and cities. After all, the “town centre first policies” of both this and previous administrations, set out to achieve this very objective. SERC is undertaking research to increase our understanding of the costs and benefits of these policies. But for the moment, these objectives look set to stay.

Second, providing “local homes for local people” is fraught with difficulties. In effect, such a policy enshrines the right to live where you are born (residency criteria) or where you work (employment criteria). Putting aside the issue of whether these are rights that we should provide for (current policy mostly focuses on housing need), they certainly clash with the desire to maintain the positive externalities of the countryside. Thus someone will have to allocate the small amount of desirable housing that gets built in desirable communities. Experience suggests this is very hard to do fairly.

Finally, it is unclear whether these changes would actually decrease local objections to increased housing supply. After all, while some of these concern the ugliness of housing that gets built, the primary objection arises for the simple economic reason that new houses reduce the prices of existing properties. Solving this problem requires us to find mechanisms to compensate the owners of those existing properties. My LSE colleague Tim Leunig has proposed one such solution. As SERC’s research progresses, we hope to develop others.

Monday, 28 July 2008


I have just finished working my way through CLG's new Regeneration Framework.

The framework, which is currently out for consultation, is intended to help answer the "why, where, and what" questions about regeneration expenditure.

In terms of the why, the suggestion is that concentrating on pockets of, for example, unemployment, is important for empowering people and improving their economic prospects. The problem, according to the framework, is that while the significant investment made to date may have helped many people, it has not actually done as much as it could to tackle the economic challenges facing disadvantaged communities (particularly worklessness).

Why should that be? Part of the answer, according to the framework, is that too much investment expenditure has gone on physical improvements (the "what") without regard to the specific problems facing neighbourhoods ("the where"). The suggested solution comes in several parts: Focus on outcomes (new jobs) not outputs (new buildings); Identify what might be good for particular neighbourhoods, depending on their circumstances (including what is going on in the wider local economy); Involve partners to do this.

Much of this seems eminently sensible. But there is a deeper question here that the framework is unable to address: Is regeneration the best way to tackle spatially concentrated deprivation? It might surprise you to find that there is almost no rigorous evidence on whether or not this is the case. That is why SERC is going to be researching issues relating to this very question as part of our ongoing research. We won't have our answers in time to influence the regeneration framework itself, but hopefully our findings will be available to help decide how it is implemented.

Tuesday, 17 June 2008

Introducing SERC: The Spatial Economics Research Centre

The Spatial Economics Research Centre is based at the LSE and brings together leading researchers in the field from across the country including those from the Universities of Glasgow, Newcastle, Oxford, Strathclyde and Swansea.

The Centre is funded by a grant of £2.4 million over an initial three years, by the Economic and Social Research Council, Department for Business, Enterprise and Regulatory Reform, the Department of Communities and Local Government and the Welsh Assembly Government.

The Centre aims to provide high quality independent research to further understanding as to why some regions, cities and communities prosper, whilst other don’t. Research will focus on why there are disparities in economic prosperity at all spatial levels including regional, city-region, local and neighbourhood.

Additionally, the Centre aims to influence and improve policy decision-making at the national and local levels, connecting UK policy makers with international expertise, research and good practice in diagnosing and tackling such differences.

The Centre is directed by Dr Henry Overman an expert in spatial economics and currently Reader in Economic Geography at the London School of Economics.

Launching the new SERC Website

The SERC website will be launching on the 25th June 2008. The site will host SERC publications such as discussion papers and policy papers and will present a full description of all the research projects the centre is running.